72% of Fortune 500 Companies Used Tax Havens in 2014

Illinois PIRG Education Fund

Tax loopholes encouraged more than 72 percent of Fortune 500 companies — including 29 in Illinois — to maintain subsidiaries in offshore tax havens as of 2014, according to “Offshore Shell Games,” released today by Illinois PIRG Education Fund and Citizens for Tax Justice. Collectively, the companies reported booking nearly $2 trillion offshore for tax purposes, with just 30 companies accounting for 65 percent of the total, or $1.35 trillion.

 “When corporations dodge their taxes, the public ends up paying,” said Abe Scarr of Illinois PIRG Education Fund. “The American multinationals that take advantage of tax havens use Illinois roads, benefit from our education system and large consumer market, and enjoy the security we have here, but are ultimately taking a free ride at the expense of other taxpayers.”

 Every year, offshore tax loopholes used by U.S. corporations cost Illinois $1.2 Billion in state tax revenue.

“It’s clear that our current tax code isn’t fostering a level playing field, in fact, it’s slanted heavily in favor of those who need the least help, leaving small and medium-sized employers and working families to foot the bill,” Illinois State Representative Jack Franks said. “There’s no more pressing challenge facing Illinois than our budget, but instead of seeking middle ground, leaders on both sides of the aisle continue to fight between higher taxes and extreme cuts. Reforming our tax code offers a third way to approach these challenges. By closing tax loopholes and special deals for big businesses, we can generate necessary revenue without raising taxes, while also cutting the taxes and fees all businesses pay.”

Illinois PIRG Education Fund’s new study shows that while most very large companies use tax havens, a smaller subset are most aggressive about using offshore tax havens to avoid taxes.

Key findings of the report include:

• At least 358 Fortune 500 companies operate subsidiaries in tax haven jurisdictions, as of 2014. All told, these companies maintain at least 7,622 tax haven subsidiaries. The 30 companies with the most money booked offshore for tax purposes collectively operate 1,225 tax haven subsidiaries.
•   Approximately 60 percent of the companies with any tax haven subsidiaries registered at least one in Bermuda or the Cayman Islands. The profits that American multinationals collectively claim to earn in these island nations’ totals 1,643 percent and 1,600 percent, respectively of each country’s entire yearly economic output.
• The 30 companies with the most money booked offshore for tax purposes collectively hold nearly $1.35 trillion overseas. That is 65 percent of the nearly $2 trillion that Fortune 500 companies together report holding offshore.
• Only 56 companies disclose the amount they would expect to pay in U.S. taxes if they didn’t report profits offshore for tax purposes. All told, these 56 companies would collectively owe $170 billion in additional federal taxes. The average tax rate the 56 companies currently pay to other countries on this income is a mere 6.3 percent, implying that most of it is booked to tax havens.

 Companies headquartered in Illinois that were highlighted include:

• AbbVie: AbbVie Inc. has booked $23 billion offshore in 35 tax havens, amongst the top 30 for amount of money held offshore.
• Caterpillar: Caterpillar has booked $18 billion offshore in 72 tax havens, amongst the top 30 for amount of money held offshore.
• Illinois Tool Works: Illinois Tool Works has booked $7.1 billion offshore in 81 tax havens, amongst the top 20 for number of offshore tax havens.

The report concludes that to end tax haven abuse, Congress should end incentives for companies to shift profits offshore, close the most egregious offshore loopholes, and increase transparency.